Revel casino warns it will close without buyer

Wayne Parry Associated Press

Posted:
06/19/2014 12:24:37 PM PDT

Updated:
06/19/2014 03:06:07 PM PDT

Click photo to enlarge

This May 30, 2014 photo shows the giant escalator that patrons entering from the Boardwalk must take to get to the casino floor of Revel Casino Hotel in Atlantic City N.J. The $2.4 billion casino filed for bankruptcy on June 19, 2014, the second time in as many years it sought bankruptcy court protection, and warned that it will shut down this summer if a buyer cannot be found. (AP Photo/Wayne Parry)

ATLANTIC CITY, N.J. (AP) — Atlantic City's Revel Casino Hotel warned its staff Thursday that it will shut down this summer if a buyer can't be found in bankruptcy court.

In warning letters given to employees and obtained by The Associated Press, Revel said it is seeking a buyer for the struggling $2.4 billion casino, but can't guarantee one will be found. If not, employees could be terminated as soon as Aug. 18, Revel said in the letter.

"If Revel is unable to complete such a sale promptly, Revel expects to close its entire facility," the letters read. The company also said it plans to stay open while it searches for a buyer.

Shortly after distributing the letters, Revel filed a Chapter 11 petition in federal bankruptcy court, its second in as many years. Revel said it hopes to find a buyer quickly.

"We will work to reach an agreement with a new owner who will help ensure Revel's long-term financial stability and who shares our commitment to providing Revel's guests and players an exceptional experience," said Scott Kreeger, Revel's president and chief operating officer.

He said the casino has obtained a $125 million loan from one of its existing financiers so it can operate during its stay in bankruptcy court.

A judge in Camden will hear Revel's so-called first-day motions Friday, including requests to continue normal operations, pay employees and bills while under Chapter 11 protection.

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Revel said the Aug. 18 date mentioned in the letter is not a deadline for a potential closure; rather it fulfills a legal requirement to give workers at least 60 days' notice of a potential layoff.

It could not be determined how much Revel might sell for in a bankruptcy auction, but it is sure to be a steep discount. Wall Street analysts and some casino executives said last month that $300 million was too high a price. A union that has been at odds with Revel since before it opened pegged its value in April at $25 million to $73 million, based on public filings.

Bob McDevitt, president of Local 54 of the Unite-HERE union, which won a representation election at Revel two weeks ago, pledged cooperation in the fight to save its workers' jobs.

"A sale of Revel to a buyer who wants to keep the property open and retain the employees is the best thing for the workers, for Atlantic City and for Revel, and Local 54 is committed to working with all parties to save the jobs," he said.

For much of the past year, Revel has sought a buyer for the property, which has remained eighth out of Atlantic City's 11 casinos in terms of the amount of money won from gamblers. But it also kept the option of a second bankruptcy filing as potential buyers expressed interest but failed to pursue a deal.

The casino is owned by investors who gained control of it during bankruptcy last year, swapping debt for equity in the property. The transaction wiped out 82 percent of Revel's $1.5 billion in debt.

But even with that breathing room, Revel continued to struggle. It acknowledged mistakes in marketing and operations, launching a massive campaign to try to win back patrons. But that backfired when a "You Can't Lose" promotion offering to refund slot losses angered many customers who thought their losses would be refunded in cash. Instead, they were gradually credited to a Revel account, with restrictions on when the credits could be used.

Since then, it opened a pool club and guest service on its beach, lowered the price of some restaurant items, booked free entertainment acts in a lounge and opened a new players' club.

All this occurred against a backdrop of increasing competition from casinos in neighboring states; four new casinos will soon open in New York. Atlantic City's casino revenue fell from a high of $5.2 billion in 2006 to $2.86 billion last year.

Revel has never been profitable since it opened in 2012. It posted a gross operating loss of $21.7 million in the first quarter this year. For all of 2013, it lost $130 million, up from the $110 million it lost during the nine months it was open in 2012.